Low Credit Ratings Prevent Bond Insurers From a Rebound
November 04 2010 - 8:46AM
Marketwired
Maintaining a high credit rating is critical to the success of bond
insurers, as these companies rely on a high credit rating to
guarantee lower rated debt. After experiencing catastrophic losses
following the 2007 subprime mortgage crisis, bond insurers began to
lose their AAA ratings and were forced to stop selling new
guarantees. In late October, Assured Guaranty lost its AAA rating,
leaving the bond insurance industry with zero companies holding the
coveted highest score. The Bedford Report examines the outlook for
companies in the Surety & Title Insurance Industry and provides
research reports on Ambac Financial Group, Inc. (NYSE: ABK) and
MBIA, Inc. (NYSE: MBI). Access to the full company reports can be
found at:
www.bedfordreport.com/2010-11-ABK
www.bedfordreport.com/2010-11-MBI
Shares of Ambac plummeted over 50% to kick off November after
the company decided to skip an interest payment on senior notes due
in 2023. This news prompted Standard & Poor's Ratings Services
to downgrade some ratings for Ambac to "D," or default status.
The Bedford Report releases regular market updates on the Surety
& Title Insurance Industry so investors can stay ahead of the
crowd and make the best investment decisions to maximize their
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Ambac also stated that it is working with bondholders to
restructure debt through a "prepackaged bankruptcy," but may file
for Chapter 11 bankruptcy before the end of the year. Earlier in
the year Ambac said it might seek a prepackaged bankruptcy, but
that its liquidity might not run out until the first quarter of
2011.
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